USD/JPY climbs toward 144.00 as Yen weakens despite BoJ’s hawkish signals, easing trade tensions lift the US Dollar

• The Japanese Yen retreats from a four-week high of 142.11 against the US Dollar.
• BoJ’s Ueda warns food inflation could push underlying inflation above 2% target.
• The USD/JPY is eyeing its next resistance around 144.50 as bullish momentum builds.

The Japanese Yen (JPY) is losing ground against the US Dollar (USD), retreating from a four-week high of 142.11 reached during early Asian trading hours on Tuesday.

At the time of writing, the USD/JPY pair is hovering near 144.00, up nearly 1.20% on the day, building on Monday’s modest gains. The sharp recovery comes despite the Bank of Japan’s (BoJ) Governor Kazuo Ueda's hawkish comments, with the US Dollar regaining some stability amid signs that trade tensions may be easing.

On the economic data front, the BoJ reported on Tuesday that the Corporate Service Price Index (CSPI) rose 3.1% YoY in April, easing slightly from an upwardly revised 3.3% gain in March. The slowdown was modest, but it still points to lingering cost pressures in the services sector.

Meanwhile, last week’s stronger-than-expected inflation print in Japan has kept the focus on the BoJ’s policy path. Japan’s core CPI climbed to 3.5% in April, marking its highest level in nearly two years and beating market expectations, mainly driven by rising food and energy costs.

Adding to the narrative, Governor Kazuo Ueda said in a BoJ-hosted conference on Tuesday that the central bank remains vigilant over the impact of surging food prices on broader inflation trends. Ueda cautioned that rising food prices, particularly the sharp jump in rice costs, could push underlying inflation beyond the central bank's 2% target.

"Given that underlying inflation is closer to 2% than a few years ago, we need to be careful about how food price inflation will impact underlying inflation," Ueda stated.

Ueda emphasized that the BoJ stands ready to adjust its monetary policy stance if needed to achieve its inflation objectives, reiterating that incoming data would guide any policy move.

A Reuters poll, conducted from May 7 to 13, showed that most economists expect the BoJ to hold rates steady through September, with a small majority forecasting a hike by year-end.

Despite the hawkish tone, the Japanese Yen struggles to hold its ground as the US Dollar regains traction, supported by improving risk sentiment following the easing of trade tensions, which offered some relief to investors. USD/JPY continues to edge higher, eyeing a potential retest of the 144.50 zone if bullish momentum holds.